Pricing and hedging of Asian options: Quasi-explicit solutions via Malliavin calculus
Yang, Zhaojun, Ewald, Christian-Oliver and Menkens, Olaf
(2011)
Pricing and hedging of Asian options: Quasi-explicit solutions via Malliavin calculus.
Mathematical Methods of Operations Research (ZOR), 74
(1).
pp. 93-120.
ISSN 1432-5217
We use Malliavin calculus and the Clark-Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and price of the Asian option as an analytic expression. Numerical computations which are based on this expression are provided.
Item Type:
Article (Published)
Refereed:
Yes
Uncontrolled Keywords:
Asian options; option pricing; hedging; Malliavin calculus